Belfast Telegraph

Sunday 13 July 2014

More benefit in welfare reform than expansion

The future of the euro is safe

I like to think I am not easily startled.

Yet startled is the only word to describe the feeling when reading the analysis of the development of the Republic's social welfare system contained in the recent report from NESC (National Economic and Social Council).

It is a truth universally acknowledged, as Jane Austen might have put it, that the boom and bubble years saw the poorest left behind and a widening of the gaps between those getting their hands on all that lovely foreign credit and those who did not. That, after all, is what almost everyone said - and mostly still do. The claims were accompanied by demands that more be spent to make Ireland more like the civilised countries of the richer part of the EU and OECD.

Some of it always seemed a bit rum. A particular bone of contention is the annual report from the United Nations showing Ireland as one of the most unequal societies in Europe. This is a view that could be held only by those who had never been to Ireland or, since most of the commentators lived here, who took their holidays in more fashionable places than Greece or Portugal. As far as I can make out, these particular statistics are geared toward developing economies and are not best suited to capturing inequality in rich economies.

In Ireland's particular case, they also reflect the undoubted fact that the best-off section of the population saw their income rise much faster than the rest of us. This section included, not only the spectacularly rich property developers and builders but company executives, senior public servants and those at the top of professions like law and medicine. The mistake is to take the experience of a lucky 5% or so as a mirror of general trends. The NESC statistics present an entirely different picture. Among the plethora of figures is one that says that, by 2007, the lowest social welfare payments in Ireland were the highest of their kind in the EU and twice those in the UK and Germany. And that is only the cash payments, before things like housing support.

By 2009, the lowest rate of child benefit - payable even to property developers and government ministers - was almost twice the OECD average and covered half the typical cost of rearing a child.

Only the Nordic countries and two former communist states were more effective in reducing the risk of poverty among people of working age.

This failure of public debate to keep in touch with this reality may have contributed to the downside of the story - that the emphasis on receipt of social welfare as a definition of poverty, and the insistence that poverty was rampant, produced highly perverse conditions by the time the bubble burst.

Another startling figure says that, as it burst, the spending trend was still accelerating.

In 2008, the income of the unemployed increased by 18%, while that of those in work grew by just 3%.

This was an extreme year, but the pattern had been in place all during the bubble.

During the Tiger period, 1994-2000, social welfare payments grew faster than prices, but more slowly than wages. In the bubble years that followed, welfare payments grew by a third more than wages.

German reforms saw the numbers entitled to employment benefit cut by half and their link to earnings abolished. The Dutch will not pay benefit to anyone under 27. The Danes don't care whether you're a single parent or not. That's reality. The debate here appears to relate to an Ireland and a Europe that do not actually exist.

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